Investors took fright on Wednesday after Next reported a fall in October high street sales, in the latest sign that retailers face difficult trading conditions in the run-up to the crucial Christmas selling period.

Next’s shares closed down more than 9% at £44.71 – the biggest faller in the FTSE 100 – after it warned of “extremely volatile” trading, with shop sales falling in October, reversing gains made in the preceding two months. Overall, the clothing retailer said sales at its shops were down by 7.7% in the three months to 29 October.

“Week-by-week sales volatility makes it very hard to determine any underlying sales trend,” Next said in a trading update. “Sales performance has remained extremely volatile and is highly dependent on the seasonality of the weather. In August and September sales were significantly up on last year, as cooler temperatures improved sales of warmer-weight stock.”

The unexpectedly downbeat figures from Next, the UK’s biggest clothing retailer, prompted investor pessimism about the prospects for high street sales in the run-up to Christmas to spread to other retailers.

Marks & Spencer, which is due to deliver its half-year update to the City next week, fell by almost 4.5%, while Sainsbury’s (down 2.6%) and Primark owner Associated British Foods (down 2.1%) were also among the biggest FSTE 100 fallers.

FTSE 250 retailers Card Factory, Dixons Carphone and Dunelm were also hit by the weaker sentiment, and were among the day’s worst performers on the index.

The business trade body warned of softening demand as inflation ate into Britons’ spending power, with department stores and specialist food and drink outlets bearing the brunt of the spending slowdown.

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Next’s Directory catalogue sales, including online, increased 13.2%, pushing total sales for full-price items up by 1.3% over the three months to 29 October.

The retailer’s third-quarter performance was actually better than the previous two quarters - when full-price sales grew by 0.7% and -3% respectively – but it was significantly below the 4% growth predicted by some analysts. Sales over the first nine months of the financial year were down by 0.3%.

Retail analyst Nick Bubb described the slide in Next’s high street sales as “sickening”.

“If such a distinguished guru as [Next chief execuive] Simon Wolfson finds it impossible to read the underlying sales trends, because of the volatility of the weather, then what are we mere mortals to do?”

George Salmon, equity analyst at Hargreaves Lansdown, said the weak sales growth over the last three months had taken the City by surprise.

He added: “While the recent investment in digital marketing seems to have helped the Directory division rediscover its mojo, Next’s high street stores saw an almighty slump this quarter. A particularly weak October means the group enters the all-important Christmas period with less momentum than it would have liked.

“While clearly not good news for Next investors, these results won’t have gone unnoticed by others across the market either. Shareholders in Marks & Spencer, for example, might now be a bit more nervous ahead of next week’s half-year numbers.”

Next expects pre-tax profits to fall from £790m in the year ending January 2017 to somewhere in the range between £692m and £742m for its full financial year ending January 2018. It was previously predicting a range of£687m to £747m.

The retailer said total full-price sales growth over the year was likely to be between –1.75% and 1.25%, having previously expected a range between –2% and 1.5%. Next said it was expecting sales in the fourth quarter to fall by about 0.3%, partly because of tough sales comparisons from a year earlier.

UK retailers are facing a challenging backdrop in the run-up to the key Christmas trading period. Real pay is falling as prices rise at a faster pace than wages, putting pressure on household budgets and making cash-strapped consumers less willing to spend money.

Monthly outgoings could be set to rise further for some UK mortgage holders, with Bank of England policymakers expected to raise interest rates to 0.5% from the current all-time low of 0.25% on Thursday.